The future is looking bright for the later life lending market, despite the recent hardship it has faced, according to Key Group CEO, Will Hale.
Hale told FT Adviser the industry is currently dealing with an ageing population which is facing a number of “really critical financial challenges” in the future, such as taking out mortgage debt later in life.
“The average first-time buyer is now in their mid-thirties, and the average duration of those mortgages is longer,” Hale said.
“That means they will inevitably be managing debt into later life. The role later life lending can have is how we help that population of customers manage that debt more effectively.”
He emphasised these future opportunities stand in contrast to the recent past of the industry, particularly following the 2022 mini-Budget.
Ever since the disastrous mini-Budget of Liz Truss it has been a much more challenging market
“2022 was the high point in terms of lending in the equity release market when the market was about £6.2mn, but ever since the disastrous mini-Budget of Liz Truss it has been a much more challenging market,” he said.
Hale said since 2022 the market had decreased in size but recently it was inching towards recovery.
“Last year, the market was worth around £2.3bn but stats from the ERC show the market is starting to recover again which is really terrific.”
He argued this could be attributed to a number of different factors, including the market’s supply and demand.
“Uncertainty and greater volatility always create, among funders and lenders, a bit of concern about where to price products,” he said.
“But, also, we’ve seen customers sit on their hands for quite a long time in terms of not wanting to progress long term financial decisions while the market environment was quite unstable.
“There’s an acceptance now for customers that we’re not going to quickly return to the rate environment we were enjoying in 2022 or 2021, so that’s caused customers to move forward with some of their financial decisions.”
Hale also praised the recent innovation in the sector, pointing out most of the products in the later life lending space allow customers to make some sort of repayment on a less committed basis.
“That’s really important in a high interest rate environment because traditional equity release products which involve roll up and compound interest can be really expensive in a high rate environment,” he explained.
“But, if customers are able to mitigate that through making repayments, that can make the products a lot more palatable.
“Advisers have been adapting their advice to the new product and customers are getting more familiar with them. The products are really important in terms of the future evolution of the market.”
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